Correlation Between ETC On and IShares Dow
Can any of the company-specific risk be diversified away by investing in both ETC On and IShares Dow at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ETC On and IShares Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETC on CMCI and iShares Dow Jones, you can compare the effects of market volatilities on ETC On and IShares Dow and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ETC On with a short position of IShares Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETC On and IShares Dow.
Diversification Opportunities for ETC On and IShares Dow
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ETC and IShares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ETC on CMCI and iShares Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Dow Jones and ETC On is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ETC on CMCI are associated (or correlated) with IShares Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Dow Jones has no effect on the direction of ETC On i.e., ETC On and IShares Dow go up and down completely randomly.
Pair Corralation between ETC On and IShares Dow
Assuming the 90 days trading horizon ETC On is expected to generate 5.94 times less return on investment than IShares Dow. But when comparing it to its historical volatility, ETC on CMCI is 1.01 times less risky than IShares Dow. It trades about 0.01 of its potential returns per unit of risk. iShares Dow Jones is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,477 in iShares Dow Jones on September 3, 2024 and sell it today you would earn a total of 2,032 from holding iShares Dow Jones or generate 37.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
ETC on CMCI vs. iShares Dow Jones
Performance |
| Timeline |
| ETC on CMCI |
| iShares Dow Jones |
ETC On and IShares Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETC On and IShares Dow
The main advantage of trading using opposite ETC On and IShares Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETC On position performs unexpectedly, IShares Dow can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares Dow will offset losses from the drop in IShares Dow's long position.| ETC On vs. Scottish Mortgage Investment | ETC On vs. VinaCapital Vietnam Opportunity | ETC On vs. Edinburgh Worldwide Investment | ETC On vs. Baillie Gifford Growth |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.
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